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Salesforce (CRM) to Report Q1 Earnings: What's in Store?

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salesforce.com, Inc. (CRM - Free Report) is set to report first-quarter fiscal 2018 results on May 18. Last quarter, the company reported lower-than-expected earnings.

Let’s see how things are shaping up for this announcement.

Factors to Consider

Although the company’s bottom-line results fell short of our estimates, we were encouraged by its top-line performance which not only fared better than our expectations, but also marked a significant year-over-year improvement.

The improvement was primarily attributed to the rapid adoption of the company’s cloud-based solutions. Also, higher demand for Salesforce ExactTarget Marketing Cloud platform, part of the Salesforce1 Customer Platform, contributed to this improvement. We expect the trend to continue in the first quarter as well.

A higher number of deal wins and geographical contributions are also likely to boost results in the soon-to-be-reported quarter. Overall, the company’s diverse cloud offerings and considerable spending on digital marketing remain growth catalysts. Moreover, strategic acquisitions and resultant synergies are anticipated to drive the fiscal first-quarter results.

Considering increased customer adoption and satisfactory performances, market research firm –Gartner – acknowledged Salesforce as the leading social CRM solution provider. We believe that the rapid adoption of the company’s platforms indicates solid growth opportunities in the expanding cloud computing space, which will, in turn, boost results in the quarter to be reported.

On the flip side, although the company is growing reasonably in the cloud market, its prospects have been rationalized to a considerable extent due to intensifying competition from Microsoft (MSFT - Free Report) Oracle Corp. and SAP AG. Moreover, currency fluctuations and stepped-up investments in international expansion and data centers could hurt the bottom line in the fiscal first-quarter results.

Salesforce.com Inc Price and EPS Surprise

 

Salesforce.com Inc Price and EPS Surprise | Salesforce.com Inc Quote

Earnings Whispers

Our proven model does not conclusively show that Salesforce will beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at 0.00%. This is because the Most Accurate estimate of 5 cents comes in line with the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Salesforce carries a Zacks Rank #3. Though this increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

A Stock to Consider

Here are a couple of stocks which, per our model, have the right combination of elements to post an earnings beat this quarter:

Applied Materials Inc. (AMAT - Free Report) , with an Earnings ESP of +1.32% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Navistar International Corporation (NAV - Free Report) , with an Earnings ESP of +62.50%, and a Zacks Rank #3.

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